These Days - Everything Bad Starts in California

 More on the duel between the fast food industry and labor unions

California op/ed by Dan Walters

Burger King Profitability - Maze

Corporate CEOs always lie about franchisee profitability

$2,000,000 profit on $1.6 million in sales? That's 12% profit on extremely low volume?

Another reason BK only has a few company stores.

Many CEOs Still Have Their Pay Tied to DEI

McDonald’s annual incentive plan continues to hold the CEO and senior executive officers accountable for efforts that drive employee engagement and values, including inclusion. - Fortune

RFK Jr. Sworn in as Trump's health secretary - ABC News

Let us not forget that Kennedy spent most of 2024 running for president as a Democrat. To a Democrat, the answer to everything is more government. He will call for more regulation with every challenge he confronts.

This will conflict with the Trump administration's focus on smaller government. Kennedy's tenure at HHS will be about 18 months.

Kennedy could boost beef tallow demand - Reuters

Some Comments From MCD Analyst Call - Maze

"The overall market is pretty muted" - MCD CEO

What Are the Plans for Your Brand?

MCD analyst conference call transcript - 2024 results - Motley Fool

CNBC on McDonald's Results - Video

Analyst David Palmer has been covering MCD for years and is usually a big fan - interesting discussion

MCD Managment Claims an Increase in USA Traffic

Is that possible along with a decrease in same-store sales?

U.S. McDonald's Customers Spend Less Per Visit in Q4

 USA SSS a full one percent below what Wall Street was expecting

SSS down -1.4%. Analysts expected to be down - .41%

There's Nothing Convenient About Cannibalization

On Monday, February 10th, McDonald's Corp. will announce its historical results for 2024 and the fourth quarter of 2024. McDonald's management has made public commitments for several years regarding the number of new restaurants it plans to open through 2027. One year ago, management promised to open 2,100 new restaurants worldwide in 2024. Did they reach their goal?

Shareholders demand never-ending sales growth from McDonald's. If those sales don't come from same-store sales, they must come from new store openings. Shareholders must be convinced that McDonald's can open an infinite number of new stores.

Unfortunately, the worst series of mistakes in the history of the McDonald's system resulted from building too many new stores too quickly. And that wasn't recently; it was a quarter century ago. We've often discussed the "Convenience Strategy" and published a summary of those events two years ago, HERE > New MCD stores 1995 to 1999

Some of the most serious mistakes made during the "Convenience Strategy" were store hungry Owner/Operators grabbing up new stores with no fear that the store should not be built. The second mistake Operators made was believing corporate assurances about cannibalization.

Some things have changed. Given changes in store economics, McDonald's Corp derives a more significant benefit from moving sales dollars from older stores to newer stores with higher rents and royalties. Another change is, there is no one working for McDonald's Corp. that knows the "Convenience Strategy" even existed or that "Cannibalization" is a real thing.

The fourth quarter of 2024 will tell us a lot about 2025.

QSR Magazine Covers the McBases

This QSR Magazine article covers McDonald's research assembled by BTIG analyst Peter Saleh. Peter covers McValue, same-store sales, new-store sales, PACE, new products, etc.

Excellent read. The author is at: 

https://www.linkedin.com/in/dannyklein14/

The verdict is still out on McDonald's latest value rush - QSR mag

From DJT

 

Chick-fil-A Successes With Drive-Thru - WSJ

For WSJ subscribers, they've published a comprehensive article on the evolution of Chick's drive-thru.

Inside Chick-fil-A drive-thru by Wall Street Journal

A recap of the WSJ article is published (free) at:

https://retailwire.com/chick-fil-a-drones/

Don't Overlook the "Comments"

Over the past few days, we've received many great anonymous comments. If you come here just looking for headlines, you're missing out. Please review the comments for the past ten days or so and make some of your own.

Giving Food Away Works on Other Continents, Right?

Even if the accounting and business reporting in India is slightly different, it's obvious what's happening. Same-store sales are up 2.8%, but profits are down significantly. They are giving the 421 stores away to keep shareholders happy with same-store sales.

McDonald's in India reported a profit drop as expenses jumped amid rising store count and promotional spending.

We Don't Like This Guy...

Robert Kennedy Jr. is a Zealot. A Zealot is emotional, irrational, and reactionary. Right out of the chute, he started referring to the food he doesn't like as "poison." After you make such an outlandish claim, where do you go? Ban everything; that's where you go. And you don't go about that banning methodically. You disrupt the entire food industry, driving supply down and prices up.

Senate hearings on his Health and Human Services Secretary candidacy begin on Wednesday (1/29). While vaccines and pharmaceuticals will receive most of the attention, if given the chance, he will want to discuss a complete overhaul of our agriculture industry, like a Zealot.

Tariq Hassan Leaving McDonald's Corp.

Maybe he got tired of implementing 40-year-old discounting plans

$117 Million Aint Beans

Starbucks paid two CEOS $117 million last year

Industry Trends

Starbucks to cut some support staff - Maze

When a company can't grow locations and sales fast enough to please shareholders, it has to squeeze operating costs until it hurts.

79 Wahlburgers to close at grocery chain Hy-Vee

Out of 109 existing restaurants.

There's a long list of celebrities failing in the restaurant business gong back to Johnny Carson's attempts to compete with Denny's.

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Elon and Vivek Make the Whitehouse Great Again

Ask if they can make a blanket fort in the Lincoln Bedroom

A Little Less McWoke

Target COO retiring after nine years on McDonald's BOD.

MarketScreener.com

Mulligan was running Target when the company featured clothing and accessories for children who thought they were "trans" and also promoted the idea of Men being welcome in Target's Women's restrooms.

Where's the Beef? Maybe in the Fryer

Steak 'n Shake (and others) converting to beef tallow for cooking fries

Papa John's: Eliminating Local Co-Ops a "big miss"

National marketing is more efficient - until it isn't: Maze

OPNAD once made a lot of sense; now it just centralizes $$$ and power in Chicago

 

More Than You Want to Know About Gavin Newsome

No, really, why is Gavin Newsome, Governor of California? - Opinion

Are There Too Many McDonald's?

One big reason for 2024's closures: Too many restaurants - Maze

A Reason Some Men Don't Wear Ties

 

McDonald's Closes Three Cosmc's

It's a story that repeats itself every 15 or 20 years. McDonald's executives (with no restaurant experience or knowledge) desperately want to be considered "restauranteurs." With other people's money and tons of excess real estate, they make a lot of mistakes.

MCD closes 3 Cosmc's - Restaurant Business Mag

McDonald's Wrestles With Sales

 

This is a nice change. Too often, McDonald's headquarters gets enamored with "artists" who do nothing but scream obscenities and lead PDiddy lifestyles. Cena appears to be the opposite.

John Cena pitches McDonald's McValue Menu

McDonald's Says Bye to DEI?

McDonald's will still be a Woke, DEI, Politically Correct company because of recent hires and the pajama boys at the top

McDonald's Real Estate, Part Deux

Our real estate discussion has gotten a little off track since we can't change the long-standing McDonald's Owner/Operator facility ownership policy. I intended to discuss modern McDonald's real estate as it applies to the McDonald's franchise. There are things happening today that were unthinkable 20 years ago.

For instance, a McDonald's in western Michigan just closed, yet according to satellite photos, it looks like a contemporary facility. Someone spent a lot of money developing and improving this store, yet the Owner/Operator had to walk away. Is this happening more frequently?

Stevensville MI is directly across the lake from Chicagoland

This is why it's a good idea to know the real estate status of each of your stores.

But as long as the history of Owner/Operator capital investments has been mentioned ... there's little fruit in comparing what McDonald's policies were in the early years and their motives today.

When it came time convert the red and white buildings to 1970s designs McDonald's was a public company but not rich. Having the money to grow and also remodel wasn't in the budget. However, the remodels, especially the addition of seating, brought huge sales increases, and management felt the operators could pay for some or all of the remodel. Adding drive-thrus brought a further sales boost, and the idea that Operators would pay for remodels became a permanent policy.

The idea that Owner/Operators should pay for "system image" was not discussed. It was all about sales increases, as were the original "Newman Deals".

So comparing corporate policy and motivations today to the first twenty years doesn't accomplish much; these are two different companies: the first, essentially a start-up, today an international money machine run by corporate raiders.

McDonald's Real Estate

 

During his outstanding presentation on the December '24 NOA webcast, Attorney Robert Zarco reminded us that McDonald's is essentially a real estate company that sells hamburgers. He made many recommendations that assume McDonald's Owner/Operators thoroughly know the real estate status of each of their restaurants.

Is that the case, or are Owner/Operators just relying on verbal representations from McDonald's corporate employees?

A little history: When Ray Kroc founded McDonald's, the Owner/Operator was usually responsible for providing the land and building.

As the company grew, the corporation provided facilities, and the real estate became a part of the franchise relationship.

When McDonald's selected a site, one of the criteria was that there would be a McDonald's at that location in perpetuity.

A purchase was always best; if a lease, there would be substantial options.

This long term mentality enhanced McDonald's portfolio and also allowed Owner/Operators to build equity.

But despite its reputation, perpetuity isn't forever. Under the new corporate management, real estate thinking might have changed. But, since everyone of the 14,000 USA locations are different, it would be difficult to identify any trends.

Is this an issue that Owner/Opertors should be discussing? 

Or is it no big deal?

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